Discussion

Rule 51.1(e) holds that the Commission will not approve settlements, whether contested or uncontested, unless they are reasonable in light of the whole record, consistent with law, and in the public interest. In D.92-12-019 (San Diego Gas & Electric (1992) 46 CPUC2d 538, 550-551), the Commission further defined its settlement review policy as applicable to all-party settlement proposals. As a precondition to approval, the Commission must be satisfied that:

a. The proposed all-party settlement commands the unanimous sponsorship of all active parties to the instant proceeding.

b. The sponsoring parties are fairly reflective of the affected interests.

c. No term of the settlement contravenes statutory provisions or prior Commission decisions.

d. The settlement conveys to the Commission sufficient information to permit it to discharge its future regulatory obligations with respect to the parties and their interests.

In this proceeding, Applicant and RRB have, pursuant to Rule 51 et seq. of the Commission's Rules of Practice and Procedure, submitted a settlement. They represent that the settlement conforms to the criteria for all-party settlements in D.92-12-019.

Applicant and RRB are the only parties and jointly sponsor the settlement. Therefore, the first precondition for approval is satisfied.

RRB's charge is to represent water utility ratepayers, and it has done so here. Applicant represents its own interests and those of its stockholders. Therefore, the parties sponsoring the settlement are fairly reflective of the affected interests. The second precondition for approval is satisfied.

The parties represent that no term of the settlement contravenes any statutory provision or any Commission decision. We concur. Therefore, the third precondition for approval is satisfied.

The settlement includes the parties' proposed summary of earnings for test years 2001 and 2002, derivation of the attrition allowance for 2003, rates for each year, tariff sheets to be put into effect if the settlement is approved, the underlying adopted quantities and an explanation of how the 2002 and 2003 rate increases will be implemented. The parties have fully defined the outcomes they have agreed to and how the settlement is to be implemented. As a result, we find that the settlement conveys to the Commission sufficient information to permit it to discharge its future regulatory obligations with respect to the parties and their interests. Therefore, the fourth precondition for approval is satisfied.

The settlement meets the requirements for all-party settlements specified in D.92-12-019.

The record contains the testimony and reports prepared by Applicant and RRB. These reports address Applicant's results of operations, attrition, rate design, tariff revisions, and cost of capital. The settlement is the result of subsequent negotiations between Applicant and RRB, and represents their final recommendation to the Commission. It indicates the negotiated result for each significant contested item. The settlement provides for an outcome that is less than what Applicant initially requested in its application and more than what RRB initially recommended in its reports. Therefore, the setlement is reasonable in light of the whole record.

It is the Commission's responsibility to set rates and charges that are just and reasonable and, therefore, in the public interest. In order to be assured that a settlement is in the public interest, it is important that the affected interests be adequately represented. Applicant has the burden of proof in this proceeding and is represented by its employees. If its shareholders are dissatisfied by Applicant's participation in this proceeding, they have the ability to make necessary changes. Therefore, the primary concern is that the ratepayers be adequately represented.

RRB's charge is to represent water utility ratepayers. RRB reviewed Applicant's workpapers, developed independent estimates, and prepared and served reports covering Applicant's results of operations, attrition, rate design, tariff revisions, and cost of capital. RRB had experienced counsel representing it at the evidentiary hearings in the proceeding, and engaged in extensive settlement negotiations after its reports were mailed. There is every indication that RRB has adequately represented the ratepayers' interests. Therefore, the settlement recommended by RRB is in the public interest.

The settlement, when reviewed as a total product, is reasonable in light of the whole record, consistent with law and in the public interest. It will be approved.